Tamilnad Mercantile Bank Ltd Management Discussions

Annexure - 4

(a) Industry structure and Developments Global Economy

Resilient growth amid geopolitical and structural shifts

The global economic environment in 2025-2026 has been confronted with high tariffs, policy uncertainty and geopolitical tensions. Early optimism, driven by easing trade frictions and strong investment in artificial intelligence (ai), initially supported a stable global growth outlook of around 3.3%. However, this trajectory was disrupted by the escalation of conflict between the United States and Iran in March 2026, culminating in the blockade of the Strait of Hormuz—a critical artery for nearly 20% of global oil and gas trade.

This event triggered a significant supply shock, pushing oil prices above $120 per barrel and raising the risk of stagflation. Consequently, global growth forecasts were revised downward to approximately 2.9% for 2026. The disruption has had widespread ripple effects, increased transportation and manufacturing costs while intensifying inflationary pressures. Additionally, supply chain interruptions—particularly in energy, fertilizers and essential goods—have led to acute shortages and price spikes, especially in import-dependent regions like the Gulf.

Despite these challenges, the rapid expansion of AI and digital infrastructure investment has provided a partial cushion. Advanced economies, particularly the United States, have benefited from productivity gains linked to AI adoption, helping offset some economic headwinds. However, this technological advantage remains unevenly distributed, widening disparities between developed and emerging economies.

Central banks, which had begun shifting toward monetary easing, have now adopted a cautious stance. Rising inflation risks have delayed rate cuts, with policymakers prioritizing stability amid uncertainty. Overall, the global economy remains resilient but increasingly vulnerable to geopolitical shocks and structural imbalances.

Source: IMF World Economic Outlook, January 2026

Domestic Economy

Resilient Growth Amid Structural Reset and Global Shock

Indias domestic economy in FY26 reflects a balance between strong structural fundamentals and emerging external pressures. The country continues to be the fastest-growing major economy, supported by a revised GDP series (base year 2022-23) that better captures economic dynamics through improved data integration such as GST. While earlier estimates placed GDP growth at 7.6%, the escalation of the Middle East conflict and resulting energy shock have led to a moderation in projections to around 7.3%, highlighting the sensitivity of growth to global disruptions.

The Reserve Bank of India has maintained a cautious “neutral” stance, keeping the repo rate at 5.25% to balance inflation and growth. Indias heavy dependence on crude oil imports—over 85%, with a significant portion routed through the Strait of Hormuz—has exposed the economy to rising input costs and potential inflationary pressures. Consequently, CPI inflation is expected to rise to 4.6% in FY27 from the low levels of 3.4% recorded in FY26.

Sectorally, agriculture remains a stabilizing force despite slower growth of 2.4%, supported by allied activities like livestock and fisheries. However, margin pressures may increase due to higher fertilizer and energy costs. The industrial sector has demonstrated strong momentum, with manufacturing growth remaining robust, though rising input costs and supply chain disruptions are beginning to compress margins.

The services sector continues to be the primary growth driver, expanding at over 9%, supported by digital services, financial activity and strong exports. Growth in AI-led services and Global Capability Centres reinforces Indias global positioning, although rising input costs may eventually affect pricing.

On the demand side, consumption and investment remain key pillars. Private consumption has strengthened, while capital expenditure—both public and private—continues to drive growth. Strong foreign exchange reserves and manageable external balances provide resilience. Overall, despite global uncertainties, Indias structural strength position it as a stable growth leader.

(b) Banking Sector:

i) Deposits & Credit Growth:

All Scheduled Commercial Banks (ASCB):

During the Financial Year 2025-26, ASCB Deposit registered an absolute growth of approximately S31.66 lacs crore, maintaining a Y-o-Y growth of 13.40%. Concurrently, Credit expanded by approximately S30.12 lacs crore, with a robust Y-o-Y growth of 15.96%. This sustained credit momentum, outstripping deposit accretion in several fortnights, has pushed the Incremental Credit-Deposit (CD) Ratio to nearly 97.00% for the fiscal year, with the overall CD ratio of 81.71%.

TMB

During the Financial Year 2025-26, the Bank registered a growth in Deposit by S8,023 crore, with a Y-o-Y growth of 14.94%. Loans and Advances grew by S9,013 crore, a Y-o-Y growth of 20.32% which has pushed the incremental CD Ratio to 86.50%

ii) Lending Rate Movements:

The banking sector witnessed significant downward transmission following cumulative repo rate cuts (totaling 125 bps) during 2025, with the policy rate standing at 5.25% as of March 2026.

• The Weighted Average Lending Rate (WALR) (Fresh): WALR on fresh Rupee loans of SCBs stood at 8.40% in March 2026, compared to 9.35% in March 2025.

• WALR (Outstanding): The WALR on outstanding Rupee loans of SCBs declined to 8.99% in March 2026 (from 9.77% in March 2025).

• 1-Year MCLR: The median 1-Year Marginal Cost of Funds-based Lending Rate (MCLR) of SCBs decreased to 8.40% in March 2026 (compared to 9.00% in March 2025).

• The WALR on fresh as well as outstanding rupee loans exhibited a mixed movement across sectors in March 2026

iii) Deposit Rate Movements:

• The Weighted Average Domestic Term Deposit Rate (WADTDR) (Fresh): WADTDR on fresh rupee term deposits of SCBs stood at 6.70% in March 2026, reflecting the impact of the easing cycle (6.65% in March 2025).

• WADTDR (Outstanding): The WADTDR on outstanding rupee term deposits of SCBs moderated to 6.62% in March 2026 (down from 7.03% in March 2025).

iv) Asset Quality & Capital

The Banking Sector continues to demonstrate high resilience and a “cleaner” balance sheet as of the end of FY 2025-26.

• GNPA & NNPA: The Gross Non-Performing Assets (GNPA) ratio of SCBs reached a historic low of 2.15% (reported as of February 2026), while the Net NPA (NNPA) ratio improved to 0.93% (as of December 2025), supported by falling slippages and steady write-offs.

• CRAR: The overall Capital to Risk-Weighted Assets Ratio (CRAR) for SCBs remains robust at 16.8%, significantly above the regulatory minimum, providing an ample buffer for credit expansion in the upcoming fiscal year.

Performance highlights of the Bank

• Total Business portfolio of the Bank crossed ^1,15,000 crore, registering a 17.28% Y-o-Y growth from 598,055 crore

• Total Deposit portfolio of the Bank crossed 561,712 crore.

• Gross Advances increased to 553,379 crore, recording a 20.31% Y-o-Y growth from 544,366 crore.

• Expanded branch network with the opening of 44 new branches during FY2025-26, which has helped strengthening the Banks footprint and future growth platform.

• Book Value per Share improved to 5638, reflecting a 12.13% Y-o-Y increase from 5569.

• Net Profit rose to 51,338 crore, delivering a 13.10% Y-o-Y growth over 51,183 crore.

• Interest Income improved to 55,819 crore from 55,291 crore Y-o-Y .

• Total Income moved to 56,696 crore from 56,142 crore Y-o-Y.

• The RAM (Retail, Agri & MSME advances) segment constituted 95% of the total advances, up from 93%.

• The CRAR% increased to 33.73% from 32.71% Y-o-Y.

• Total SMA to Gross Advances declined to 1.29% from 2.55% Y-o-Y.

• Stressed Assets ratio decreased to 1.14% from 2.01% Y-o-Y.

• The Banks Net worth increased to 510,110 crores (PY 59,009 crores) with an absolute rise of 51,101 crores registering a growth rate of 12%.

(c) Segment-wise / Product-wise Performance: Advances

(Rs. in Crores)

Particulars	Mar25	Mar26	YoY Growth (Mar26 vs Mar25)
Gross Advances	44,366	53,379	20.32%
Of Which
Retail Sector	9,186	14,912	62.33%
Agriculture Sector	18,591	20,084	8.03%
MSME Sector	13,520	15,532	14.88%
Total of RAM	41,297	50,528	22.35%
RAM % to Gross Advances	93%	95%	1.58%
Others	3,069	2,851	-7.10%
CD Ratio (%)	82.64%	86.50%	3.86%

• GNPA reduced to 0.73% (lowest in ~40 quarters)

• NNPA improved to 0.18%

• Provision Coverage Ratio (PCR) improved to 96.14% (with write-offs)

• Credit cost remained very low at 0.03%

• Stressed assets ratio declined to 1.14%, showing better risk control

• 44 new branches opened during FY 2026 (including expansion outside Tamil Nadu)

• Digital transformation nearing completion with increasing digital transactions share (~97%)

• CASA growth driven by new initiatives like Transaction Banking Group & Elite Services Group

• Focus on secured lending with very low unsecured exposure (~0.10%)

(d) SWOT Analysis Strengths

• Over 104 years in the Banking Industry with an impeccable track record.

• Total business crossed 51.15 lakh crore, supported by advances growth of over 20% and deposits

growth of nearly 15%, representing the strongest expansion in recent years

• Consistently maintained relatively lower Gross NPA and Net NPA levels compared to peer Banks.

• Stable customer relationships and loyal depositor base support low-cost funding.

• A dedicated and proficient workforce.

• Consistent dividend payment record.

• A rich heritage, a dedicated customer base and a commitment to enhancing our service framework.

• Known for prioritizing customer service above all.

• Comprehensive bouquet of products - both in liabilities and assets.

• Continues to enjoy a strong presence in Southern India, particularly among MSME and trader communities

• Consistent financial performance.

• Diversified Loan Portfolio

• High Customer Retention

Weakness

• Business operations remain concentrated in Southern markets, particularly Tamil Nadu, limiting nationwide market penetration

• Limited presence in Metro or Urban centers, outside Tamil Nadu.

• Competition from digital-first banks and fintech players poses challenges in attracting younger customers

• Revenue concentration tilted towards interest income rather than diversified fee-based businesses.

Opportunities

• Formation of CMC to handle entire life cycle of advance other than jewel loans making the branch liability focused and to grow rapidly in Advances.

• Formation of Integrated Back Office Team (IBOT) to optimize resource utilization, streamline workflows, improve turnaround times (TAT) and consolidate various back-office support functions under a unified administrative and operational framework. The initiative will reduce the back office work in the branch and it will lead the branch to concentrate on business considerably.

• Opportunities for expansion in the digital domain through the introduction of lending services on Internet and Mobile platforms.

• Increasing the CASA portfolio to improve Net Interest Margin (NIM).

• Establishing branches at various locations outside Tamil Nadu to expand our footprint and enhance business opportunities.

• Developing and offering innovative financial products and services to meet evolving customer needs and preferences.

• Adapting to regulatory changes and leveraging them to improve operational efficiency and compliance.

• Focusing on improving customer service and experience to retain existing customers and attract new customers.

• Rising digital transaction volumes can enhance customer acquisition and engagement.

• Expansion into potential unbanked rural areas to increase penetration.

Threats

• Increasing competitive pressure from large Private Banks, PSU Banks, Small finance banks and fintech companies

• Rising digitalization increases exposure to cyber threats, frauds and operational risks.

• MSME and Agriculture focused lending portfolio may face stress during adverse economic conditions.

• Customers are increasingly prioritizing investments to different asset classes over traditional investments such as savings and term deposits.

• Continued Geopolitical tensions.

(e) Outlook

Focus Area	• The Viksit Bharat Pillars: Continued emphasis on Saptarishi priorities with a refined focus on Digitization of Agriculture, Energy Transition and High-Tech Manufacturing (Semiconductors/EVs).
	• Engine Growth: Driven by a “Triple-I” framework: Infrastructure, Innovation and Inclusivity.
Macro-economic	• Nominal GDP Growth: Estimated at 10.5% for FY27.
Indicators	• Fiscal Deficit: Pegged at 4.0% of GDP (^16.20 lakh crore), adhering to the glide path from 4.4% in FY26.
	• Market Borrowings: Gross borrowing estimated at ?15.5 lakh crore; Net borrowing at f12.1 lakh crore.
Rural & Agricultural Initiatives	• Digital Public Infrastructure (DPI) for Agri: Implementation of Agri-Stack in 150 districts to provide 2.5 crore farmers with digital identities and crop surveys.
	• Climate-Resilient Seeds: Introduction of 109 high-yielding, climate-resilient varieties across 35 crops.
	• Kisan Credit Card (KCC) 2.0: Integrated with the Grameen Credit Score to enable instant, paperless limit enhancements.
Banking & Financial Sector Reforms	• Unified Lending Interface (ULI): Nationwide rollout to reduce credit appraisal time for rural and MSME borrowers from weeks to minutes.
	• Climate Finance Taxonomy: Launch of a standardized framework to facilitate green lending and “Green Deposits.”
	• IFSC Expansion: New incentives for “Aircraft Leasing” and “Ship Leasing” to be centralized in GIFT City.
MSME Growth	• Credit Guarantee Scheme: Limit for collateral-free loans increased to S10.00 crore for manufacturing MSMEs.
	• TReDS Platform Expansion: Mandatory onboarding for all companies with turnover >?250.00 crore to ease MSME liquidity.
	• New Udyam Assist Certificates: To bring 5 crore informal micro-enterprises into the formal banking fold.
Infrastructure	• Capex Outlay: Increased by 12% to ?12.8 lakh crore (approx. 3.4% of GDP).
Development	• PM Gati Shakti: Allocation of S2.5 lakh crore for “Railway Corridors” and “Port Connectivity” projects.
	• Housing: PM Awas Yojana (Urban & Rural) 2.0 targeting an additional 3 crore houses.

Budget Impact on (CASA)

Higher disposable Income

• Tax Efficiency: The increase in the effective tax-free threshold to S12 lakh (under the New Tax Regime via enhanced rebates) and the hike in Standard Deduction to ^75,000 has significantly boosted the marginal propensity to save. This is expected to drive steady inflows into Savings Bank (SB) accounts.

• Rural Velocity: The nationwide rollout of Kisan Credit Card (KCC) 2.0 and integrated rural credit stacks has increased transaction frequency in Rural and Semi-Urban (RUSU) areas, enhancing low-cost float.

Digital & Credit Inclusion

• Unified Lending Interface (ULI): The implementation of ULI for friction-less credit has automated the flow of funds, keeping credit disbursements within the banking ecosystem longer and supporting Current Account (ca) balances.

• Bharat Trade Net (BTN): This platform has streamlined trade finance documentation, attracting higher CA balances from exporters and importers through integrated settlement accounts.

Budget Impact on (Deposits)

Tax-Advantaged Savings

• Senior Citizen Incentives: The interest deduction limit under Section 80TTB remains at an elevated ^50,000 ensuring the continued attractiveness of Term Deposits for the retail segment.

• Middle-Class Surplus: Reduced tax outgo for the S7L-S15L bracket has channeled systemic liquidity toward Fixed Deposits (FDs) as a primary volatility hedge.

Fiscal Stability & Safe Haven Appeal

• Consolidation: A lower Fiscal Deficit target of 4.3% for FY27 (down from 4.4% in FY26) has stabilized bond yields, making bank deposits more competitive relative to debt mutual funds.

• Sovereign Linkage: Stable government borrowing (Gross: S15.5 lakh crore) has allowed banks to offer attractive G-Sec linked deposit products without aggressive repricing.

Challenges

Increased “cannibalization” of deposits by equity-linked products remains a risk as retail participation in capital markets continues to hit record highs.

Budget Impact on (Advances)

MSME & Rural Expansion

• Credit Guarantees: The expansion of the CGTMSE coverage for manufacturing MSMEs and the launch of S10.00 lakh MSME Credit Cards have created a massive pipeline for high-yield unsecured and semi-secured lending.

• Agri-Stack Integration: The digital mapping of 2.5 crore farmers facilitates better underwriting for agricultural loans, reducing the risk premium and boosting credit demand.

Infrastructure Momentum

• Capex Push: The S12.8 lakh crore central capex outlay (3.4% of GDP) acts as a multiplier for corporate credit, specifically in the cement, steel and green energy sectors.

• PM Awas Yojana 2.0: Allocation for 3 crore additional houses has revitalized the affordable housing finance segment for banks and NBFCs.

Challenges

• Rising cost of funds may pressure Net Interest Margins (NIMs) if deposit repricing lags behind the credit growth curve.

Strategic Roadmap (FY 2026-27)

To capitalize on this macroeconomic environment, the Bank is executing the following strategies:

• Focused Liability Acquisition: Leveraging the Transaction Banking Group (TBG) and Global NRI Centre (GNC) to capture high-velocity CA and NRI deposit flows.

• Centralized Credit Lifecycle: Full operationalization of the Credit Management Centre (CMC) across all Regional Hubs (rh) to handle the entire lifecycle of advances (excluding Jewel Loans), allowing branches to remain “Liability Focused”.

• Tiered CASA Strategy: Aggressive marketing of Royal and Premium Savings accounts, alongside Flexi-Current and TASC (Trusts, Associations, Societies and Clubs) accounts to improve the granular deposit base.

• Inclusion & Loyalty: Expansion into deep-rural geographies via Business Correspondents (BCs) and the introduction of data-driven loyalty programmes to minimize customer churn.

Technology Enablement

These strategies are underpinned by a robust technology stack functional for FY 2025-26/27:

• Loan Origination System (LOS) / Loan Management Systems (LMS) Platform: A comprehensive system with a Business Rule Engine (BRE) for instant digital credit decisions and state-of-the-art Customer Relationship Management (CRM) features.

• Digital Engagement Hub (DEH) Platform: The revamped Internet Banking platform (by Edgeverve/Infosys) for superior digital Customer Experience (cx). Tax Integration: Direct leveraging of CBDT and GST payment facilities to drive non-interest income and transaction-based float.

• Vendor Management System (VMS): A state-of-the-art Vendor Management System for a unified Single Expense Management System across the banks entire operational network.

(f) Risks & Concern

The Risk Management philosophy of your Bank is to accept risk as an essential aspect of business and take necessary steps to manage and mitigate the risk. Your Bank seeks to build business which expands but always within the framework of the risk management principles. As with all banks in the banking system, your Bank is exposed to various risks that are inherent to any banking business. The major risks are credit risk, market risk including interest rate risk and liquidity risk, Operational risk, Reputational and strategic risks. Your Bank has put in place a very responsive risk management framework. The Bank has robust risk management policies, well laid out procedures, processes and methodologies to manage the risks envisaged.

The overall responsibility for establishing a strong risk management framework lies with the Board of Directors. The Risk Management Committee of the Board (RMCB) oversees the implementation of various measures for efficient risk management with the support of the Executive Level Committees.

Risk Management Department is headed by the Chief Risk Officer, who is responsible for the risk management functions of your Bank. An independent risk governance structure has been put in place, duly ensuring independence of risk measurement, monitoring and control functions. The bank has a well-articulated risk appetite statement and activities of the bank are structured to fall in line with the risk appetite, which is defined.

Your Bank has an internal rating mechanism, which forms the basis for risk linked pricing framework. The bank also has a scoring structure for the retail loans. The loan policy of the Bank ensures that the underwriting standards are maintained, online and offline monitoring methods are devised to strengthen supervision of credit and whenever weaknesses are perceived, risk mitigation measures are implemented. The Bank has implemented an EWS (Early Warning System) which is an automated environment for early detection of incipient weakness or stress in loan accounts.

The Bank has exposures in RAM segment i.e. Retail, Agriculture and MSME. The bank has been traditionally strong in these areas and proposes to build on the expertise it has gained over the years for further growth in these segments. Retail has a specific focus of home loans and the Bank intends to increase the exposure in this portfolio. The risk management structure for identifying, measuring, monitoring, controlling and mitigating the risks for these portfolios are well entrenched.

With regard to industry exposure, in addition to good underwriting skills strengthened by established appraisal norms, there are also mechanism of capping various exposures on the basis of the borrower group, industry, credit rating grades and geography, amongst others. Further major sectors are also monitored by having caps in place. Concentration risk is tracked by putting proper limits.

Credit risk is managed in your Bank through its various policies, risk assessing tools and risk mitigating measures, relying upon internal rating, external rating, post-disbursement monitoring and Early Warning System (EWS), which forms the base for good credit growth coupled with better asset quality.

Your Bank has put in place proper framework for market risk management. The Bank has a conservative approach to investment and mainly invests in Government securities. In case of investing in bonds of corporate entities, the Bank ensures that the external rating of the entity is investment grade only.

The forex activities are mainly trade finance oriented, purchasing, discounting and negotiating bills drawn on various currencies on account of the bank customers. The Bank has put in limits with regard to its foreign currency position like Net Overnight Open position, Currency wise aggregate gap limits etc., so that the fluctuations of foreign currencies does not lead to any substantial loss to the Bank. Counterparty limits for exposures with banks are also in place to ensure that the Bank does not enter into any high exposures with banks. Most of the currencies dealt with/by the Bank are settled through CCIL and CLS mechanism thereby reducing counterparty risks.

The Bank also understands that the Operational risk is one of the major risks faced by banks and there is a need to have bank wide structure in place to identify, monitor and mitigate this risk. The Bank conducts Risk and control Self-assessment (RCSA) on its products and processes to understand the control deficiencies, if any and take steps to address the same. Further, the Bank is laying great emphasis on training and educating its staff on all banking matters especially in various types of products and processes so that errors can be minimized. System based checks are also in place to ensure that the mistakes can be prevented. Your bank is taking all the steps necessary to ensure that the impact of operational risk is reduced.

(g) Internal control systems and their adequacy.

INSPECTION AND AUDIT

Inspection and Audit independently evaluates the adequacy, completeness, operational effectiveness and efficiency of all internal controls, risk management systems and processes of the Bank. The Audit Committee of the Board provides direction and reviews the adequacy of internal audit function, including its reporting structure, staffing, coverage and frequency of audits. The Head of Inspection Department (HIA) reports directly to the Executive Director (the reporting authority); the ACB serves as the reviewing authority in matters of performance appraisal of the HIA, as required under the RBI circular on RBIA Framework dated January 07, 2021. An executive level committee, named the “Audit Committee of Executives”, headed by Executive Director and MD & CEO as Invitee, oversees the audit and inspection functions and reviews the audit procedures and methodologies, effectiveness of audit systems, progress in completion of audits, risk rating of branches and significant audit findings. The Risk Based Internal Audit Policy, Credit Audit Policy, Management Audit Policy, Concurrent Audit Policy and Information System Audit Policy which serve as the basic guidance documents for internal Audit function, were subjected to annual review during the year. The review covered appropriate modifications and refinements based on regulatory guidelines, changes in internal rules and guidelines, directions of the Audit Committee of the Board and the Board of Directors. The review and modifications ensured that the audit systems and procedures are contemporary and continue to be an effective tool for monitoring control and compliance in the Bank. Inspection & Audit Department is responsible for self-assessment of the Banks internal financial controls by testing and validating the effectiveness of controls on an ongoing basis. The major audits undertaken by the Bank during the financial year are:

Risk Based Internal Audit

Your Bank has leveraged on Risk Based Internal Audit (RBIA) as a tool to assess the risks in its processes, operations and effectiveness of related controls. Risk Based Internal Audit conducted at branches focus on evaluating the branches based on the level of inherent business risks and control risks. 517 branch Risk Based Internal Audits were conducted during the Financial Year 2025-26.

Information System Audit

Information System Audit collects and evaluates the evidence to determine whether the information system safeguards assets, maintains data integrity and availability, achieves organizational goals effectively.

It focuses on the risks that are relevant to information assets and assesses the adequacy of controls implemented for mitigating the risks. All critical IT infrastructures in the Bank are subjected to Information System Audit by External Audit firms and Internal Auditors of the Bank. Information System Audit is covering various security aspects of IT systems and business continuity procedures is conducted at branches/ offices. During the financial year 2025-26, Information System Audit was conducted in 538 audits (517 branches and 21 Departments).

Management Audit

Management Audit in the Bank essentially focuses on identifying the adequacy and effectiveness of processes adopted for decision making in Regional Offices, various Head Office Departments of the Bank i.e. International Banking Division, Integrated Treasury Department, Information Technology Department , Inspection Department, including IS Audit Cell, Human Resources Development Department, Vigilance Department, Accounts Department, MIS Department, Credit Resolution Department, Credit Department, Credit Monitoring Department, KYC/AML Cell, Risk Management Department, Secretarial Section, Compliance Department, Customer Value Enhancing Department, Operations & Services Department, Customer Service Cell, Office of the Internal Ombudsman, Legal Department, Staff Training College, Bancassurance cell, DPS cell, Establishment Department, RTGS Cell, Integrated Back Office, Disciplinary Action Cell (DAC). The feedback from management audit is relied upon by the auditee units to improve the processes, procedures and systems in place in such offices.

Offsite Audit

Offsite audit is a forward-looking diagnostic tool to identify gaps in the systems and procedures of the Bank. The revenue audit in the Bank is undertaken through Offsite Audit. OTMS (Offsite Transactions Monitoring System) is validating 33 different nature of alerts in the CBS system and generate the respective alerts and communicated to the branches to take immediate corrective action.

Concurrent Audit

Your Bank is relying on Concurrent Audit as an early warning system to ensure near real-time detection of irregularities and lapses and is also used as a tool to prevent frauds. Your Bank has implemented the revised Concurrent Audit framework, duly approved by the Audit Committee of the Board, as per RBI circular dated September 18, 2019, with effect from April 1, 2020. During the year under review, Concurrent Audit was in place at 268 branches and 30 offices, covering 69.05% of total advances and 80.06% of total deposits of our Bank. The offices covered under the Concurrent Audit include all the Regional offices, Integrated Back Office, International Banking Division, Treasury Department, DPS Cell, RTGS Cell, Forex Processing Centre, ATM Cell, Accounts Department, Information Technology Department, Establishment Department, Customer Value Enhancing Department and Branches where RBIA risk rating is assessed as “High”. Concurrent Audit is also conducted in all the currency chests as required by the Reserve Bank of India. 277 External Auditors / Audit Firms were engaged for concurrent audit assignments during the period.

Credit Audit

In your Bank, verification of account operations, end-use, stock, documents, etc. of big borrowal account limits (above S3 crore) are carried out periodically at post-sanction level and referred as Credit Audit. During the Financial Year 2025-26, 950 Credit Audits were conducted.

Audit of Outsourced Activities

A Comprehensive Risk Based Due Diligence of Partners/Service providers is conducted to ensure that they are financially stable, comply with all regulatory norms and have all the required information security controls in place to safeguard the interests of all the stakeholders of the Bank. During the Financial Year 2025-26, 24 outsourced agencies were audited.

(h) Key Financial and Operating Ratios:

Operating Performance:

Particulars	Mar25	Mar26
Total Income	6,141.75	6,696.49
Total Expenditure	4,396.02	4,841.26
Net Interest Income	2,300.93	2,527.27
Non-Interest Income	850.48	877.07
Operating Expenses	1,405.68	1,549.11
Operating Profit	1,745.73	1,855.23
Net Profit	1,182.61	1,337.55

Key Financial Ratios

Particulars	Mar25	Mar26
Cost to Income Ratio	44.60%	45.50%
Yield on Advances	10.03%	9.93%
Book Value per Share (g)	568.90	638.46
Net Worth (g in Crore)	9,009	10,110

The Banks Net worth has increased by g 1,101 crore i.e. 12% over the previous year.

Movement of Your Banks share price vis-a-vis NSE and BSE Index for the period from April 2025 to March 2026

This graph shows your Banks share price movement in NSE for the period from April 2025 to March 2026.

This graph shows your Banks share price movement in BSE for the period from April 2025 to March 2026

(g) Material developments in Human Resources / Industrial Relations front, including number of people employed.

Job Analysis and Position Description: The HRD Department conducts a comprehensive job analysis to identify the key competencies and qualifications required for each position. Based on this analysis, they create detailed position descriptions outlining job responsibilities, required skills and desired experience.

Training Needs Assessment: The HRD Department conducts regular training needs assessments to identify skill gaps and development areas among employees. This involves collecting feedback from managers, conducting performance evaluations and analyzing organizational objectives to determine the training priorities.

Designing and Implementing Training Programmes: Based on the training needs assessment, the HRD Department designs and implements various training programmes. These programmes may include technical skills training, leadership development, customer service enhancement and compliance training. They utilize internal trainers or collaborate with external training agencies to deliver high-quality programmes.

Employee Development Plans: The HRD Department collaborates closely with managers and staff members to establish personalized development plans that are in line with the organizations objectives and the individuals career ambitions. These plans delineate targeted developmental initiatives, including mentorship, coaching, job rotations and online courses, all designed to augment employees skills and competencies.

Employee and Industrial Relations:

During the past year, the Industrial Relations climate remained favourable, with due importance given to various representative bodies in order to foster harmonious relations.

Capability Building:

To facilitate individual growth and to contribute to the overall progress of the organization, our Banks Staff Training College is dedicated to creating a continuous learning ecosystem for employees. A diverse range of focused training and learning solutions is offered, including:

(a) Self-learning TMB eSMART Certifications,

(b) Support for capacity - Building certifications,

(c) Talent Pool System - Grooming of Talented employees in an efficient way,

(d) One Hour Learning

These initiatives provide employees with multiple avenues to continuously enhance their skills, acquire new competencies and confidently adapt to the evolving demands and challenges of the times.

Digital Training Programs -

• Programme in IT and Cyber security for CXOs and Senior Management

• Programme on Big Data Analytics for Banks

• Programme on Security, Scale and Access for Digital Payments

• Programme on Intelligent Banking Unlocking the Power of AI / ML in Banking

• Oracle Fusion Cloud Unplugged HCM & EPM Workshop

• Programme on Cyber Security for IS Auditors

• Programme on Business Analytics, Machine Learning and Artificial Intelligence and its Implication in Banks Equity and Diversity -

Executive Development Programme for Women Officers of the Banks/FIs, in addition to multiple internal women leadership training.

• CERT-Ins Cyber security awareness Session “Cyber Hygiene Essentials for Women Officials”

• CERT-Ins Cyber security technical Session “Cyber Threats and Countermeasures for Women Officials” Professional Development Networks -

Tie-ups/arrangements with One Hour Learning for Communication upskilling, Confidence building, managerial effectiveness and Soft Skill Development.

Online Training Programs -

• Programme on KYC / AML / CFT

• Cyber Security and Phishing Mail

• Programme on Guidelines related to Export & Import Transactions

• Sensitization on Interaction with Persons with Disabilities and Accessibility Support

• Programme on Marketing of Retail Loan Products and its Assessment

• Programme on Regulatory and Statutory Guidelines on Anti Money Laundering including KYC and Combating Financial Terrorism Risks

• Programme on Cyber Resilience in Banking - Mastering IT Risk & Financial Crime Prevention

Emerging Leaders Initiative: -

• Advanced Management Programme in Banking and Finance-IIBF

• Programme on Strategic Leadership in Banking Industry and Organizational Change Management

• Programme on Effective Branch Management, Leadership and Administrative Competency

• Enhancing Proficiency in Branch Business Performance for First Time Branch Heads

• Enhancing Proficiency in Branch Banking Business for Officers

• Risk Management Training Programme for Senior Management

Learning Accelerator e-Smart- Capacity building programme in TMB eSMART

In eSMART, staff are encouraged to get certified; due weightage for promotion and placement will be accorded to staff getting certified. TMB eSMART Certificate is given due weightage in our Staff Annual Appraisal and Promotion Appraisal.

Evaluation and Feedback: The HRD Department evaluates the effectiveness of training programmes and development initiatives through feedback surveys, post-training assessments and performance evaluations. This feedback loop helps in continuously improving the training interventions and ensures that employees receive valuable learning experiences.

Communication and Feedback Channels:

The HRD Department establishes effective communication channels to ensure transparent and open communication between employees and management. This includes regular team meetings, suggestion boxes, online platforms and anonymous feedback mechanisms, enabling employees to express their ideas, concerns and suggestions.

Work-Life Balance Initiatives: Recognizing the importance of work-life balance, the HRD Department implements various initiatives to support employees in achieving harmony in their personal and professional lives. These initiatives may include flexi-time, wellness programmes, employee assistance programmes and stress management workshops.

Team Building Activities: The HRD Department organizes team-building activities and events to foster a sense of camaraderie, collaboration and trust among employees. These activities include sports events, social gatherings and cross-functional projects, enhancing teamwork and employee relationships.

Employee Wellness Programs: To promote employee well-being, the HRD Department implements wellness programmes focused on physical, mental and emotional health. These programmes include Yoga sessions, health screenings, mindfulness sessions and access to counselling services. By prioritizing employee wellness, the HRD Department contributes to a healthier and more productive workforce.

Employee Satisfaction and Retention: Through its various initiatives, the HRD Department plays a significant role in enhancing employee satisfaction and retention. By ensuring fair recruitment processes, providing training and development opportunities and implementing effective performance management systems, the HRD Department creates a positive work environment that fosters employee loyalty and reduces turnover rates. The attrition rate in the bank is at 6.18%.